DIXON City officials asked residents at a town hall this month what they wanted to do with money from a legal settlement.
Cut sewer rates, many said.
The money involved is the $40 million that the city expects to recover in a lawsuit from the Rita Crundwell theft.
To some residents’ dismay, Finance Director Paula Meyer’s recommendations for the recovery funds did not include paying off the $9 million owed on a sewer plant loan, which, in turn, could reduce sewer rates.
Meyer suggested $6 million go toward deferred capital sewer projects instead, explaining that lowering sewer rates could do damage to the city’s sewer fund.
A decade ago, the City Council passed an ordinance increasing sewer rates by 3 percent a year until 2021 to take on the cost for construction of a new wastewater plant. At that time, the city obtained an $18.4 million loan to pay for it.
Dixon residents pay $34.20 a month in sewer rates for using 6,000 gallons of water. In comparison, Sterling residents pay $22.66, and Rock Falls residents $61.65.
The sewer fund is projected to net $292,300 for the 2014 fiscal year and have a cash balance of $998,336. That’s with spending $122,000 in capital projects.
Under the current rate structure, the sewer fund is expected to have $2.9 million in the bank by the end of the 2018 fiscal year, according to Meyer’s projections.
Those projections don’t include deferred sewer capital projects, Meyer said.
A River Street sanitary sewer replacement is considered the most necessary project, at an estimated cost of $1 million. A failure of this portion of sewer would be catastrophic to the residents and businesses in the area, causing sewage to go into the Rock River, according to a report filed by Dan Mahan, the city’s wastewater superintendent.
An additional $1.1 million will be needed to upgrade a lift station at Raynor Garage Doors and replace other aging equipment, not to mention an unfunded mandate from the Environmental Protection Agency for phosphorus removal at the wastewater treatment facility that could cost several million dollars, according to Mahan’s report.
Hypothetically, if the city were to eliminate sewer fees, the sewer fund would lose about $2.4 million a year in revenue, Meyer said.
A debt payment of $1.2 million would come off the books, but the $1 million to tackle the River Street sanitary sewer still would need to be paid, she said.
As an end result, the sewer fund would end up with an estimated $768,546 deficit by the end of the 2015 fiscal year, according to her projections shown in a spreadsheet.
An additional $2 million in capital projects would be needed the next year and about $1 million the following year, sinking the sewer fund more into debt.
Any hypothetical relief to the sewer rate would be short-lived, Meyer said.
“The city has enough capital projects to tackle that the rates would eventually have to go up to pay for them,” Meyer said.
Since the wastewater plant is expected to last at least 30 years, she said, the city’s loan for it is an example of “intergenerational equity.”
“The cost is shared by future users and spread out over a period of time,” Meyer explained. “We know the sewer plant is going to be there for a while.”